Reassessing FirstEnergy’s Valuation After Its Recent Share Price Strength

FirstEnergy (FE) has quietly outperformed many utility peers over the past year, and that strength is drawing fresh attention as investors reassess defensive stocks in a choppy interest-rate backdrop.

See our latest analysis for FirstEnergy.

At around $44.26 per share, FirstEnergy’s roughly 11% year to date share price return and robust five year total shareholder return above 80% signal momentum that still looks supported by improving growth and a steadier risk backdrop.

If this kind of steady compounding appeals to you, it could be a good moment to broaden your watchlist and explore fast growing stocks with high insider ownership.

Yet with shares still trading below consensus targets despite solid earnings growth, investors face a key question: Is FirstEnergy quietly undervalued, or is the market already baking in most of its future upside?

Most Popular Narrative Narrative: 12% Undervalued

With FirstEnergy last closing at $44.26 versus a narrative fair value near $50, the gap points to upside if its growth and grid plans play out.

Large-scale infrastructure modernization and grid hardening initiatives, including the $28 billion investment plan through 2029 and a 15% CAGR in transmission rate base, enable higher returns on equity, improved reliability, and ultimately enhance net margins and earnings growth.

Read the complete narrative.

Curious how a regulated utility earns a double digit uplift in value without explosive growth? The secret lies in a powerful mix of expanding rate base, rising margins, and a future earnings multiple usually reserved for market favorites. Want to see exactly how those assumptions stack up over the next few years, and what they imply for cash generation and shareholder returns?

Result: Fair Value of $50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, accelerating distributed energy adoption and lingering legal or regulatory overhangs could weigh on demand growth, margin expansion, and ultimately valuation re-rating.

Find out about the key risks to this FirstEnergy narrative.

Another View: Cash Flows Tell a Different Story

Our DCF model is far less upbeat than the narrative fair value, suggesting FirstEnergy’s shares are trading above an estimated fair value of about $28. That implies the current price bakes in much stronger cash generation than our base case, which raises the risk of disappointment if growth cools.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out FirstEnergy for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 907 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own FirstEnergy Narrative

If you see the story differently, or simply prefer digging into the numbers yourself, you can build a complete narrative in minutes with Do it your way.

A great starting point for your FirstEnergy research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

Ready for more investment ideas?

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• Capitalize on mispriced potential by scanning these 907 undervalued stocks based on cash flows that may offer stronger upside relative to their current market expectations.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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